Livedoor Scandal Affects Funds With Exposure

he ongoing investigation into alleged market tampering at Livedoor Co. is having an effect on mutual funds specializing in Japan, The Wall Street Journal reports. Although funds were not, at first, expected to be affected by investigations into this one company, two-thirds of Livedoor's market capitalization has been wiped out and investors in Japan have resorted to panic selling. The sell-off could even become more severe, following the arrest of the company's CEO Takafumi Horie Monday night.

The impact may be the most critical for Fidelity Investments, which indicated it owned 6.88% of Livedoor's outstanding shares as of the end of December. Nomura Asset Management also runs several funds with large exposure to Livedoor, according to The Journal. In addition, late last week, a number of fund companies posted news of the impact on their holdings on their Japanese Web sites. These included Franklin Templeton Investments, which revealed it had a 0.36% exposure to the company in each of two funds; Nomura, which revealed a 1.6% exposure; and Capital Research and Management, which indicated a 0.2% exposure, also in each of two funds.